It’s a seller’s market for island homes
From The Moorings to John’s Island, a seller’s market has taken hold up and down the length of the barrier island, with some homes closing before the ink is even dry on the listing agreement.
“It’s a seller’s market mainly because of the lack of inventory,” says island broker Alex “Buzz” MacWilliam. “We have approximately half the inventory we did three years ago and sellers are in control of the process and decision making.”
A revived economy, historically low mortgage interest rates that might soon rise, and a national surge in the sale of vacation homes are other factors in the equation that has shifted power to sellers, and put some buyers in near-panic mode.
How fast are homes flying off the shelves?
“A competitor recently listed a home in Central Beach and put a yard sign out in front,” says MacWilliam. “Before it was submitted to MLS, one of my agents drove by with a buyer who liked the house.
“My agent called the listing agent who provided the price and said it was okay to show. The buyer looked at the house and made an offer the same day. Later that day, the property was submitted to MLS and there were two more offers within 24 hours. Fortunately, our buyer ended up getting the house, paying $12,000 over asking.”
Marsha Sherry, broker at The Moorings Realty Sales Company, reports a similar incident: “In August we listed a house across from the beach, and before we got the listing agreement back from the seller, we had it under contract. It was sold within two days.”
“The inventory is very thin and extremely picked over,” says Michael Thorpe, co-owner of Treasure Coast Sotheby’s International Realty. “For that reason, when we list good houses and condos that are priced within reason, they sell right away. If buyers see what they like, they are not bashful about paying full price or, in some cases, above asking.”
Thorpe’s office provided a spread sheet of recent Sotheby’s sales showing six homes that were on the market for less than a week, including one that went under contract the same day it was listed, and another that received multiple offers before going up on MLS and sold in one day.
The seller’s market prevails in neighborhoods without homeowners associations as well as in gated communities.
“Oh my gosh, yes! It is a seller’s market in Central Beach – there is no inventory east of A1A close to the ocean in move-in ready condition,” says Christine McLaughlin, owner of Shamrock Real Estate Corp., who expects bidding wars for desirable houses to become common in this neighborhood.
“There is a backlog of buyers. We have orders, so to speak, for properties that are purchased as soon as they are listed, with multiple interested parties for certain types of properties,” says Bob Gibb, broker at John’s Island Real Estate Company.
Gibb says for-sale inventory in the island’s signature club community has fallen to about 2 percent of all homes, down from 10 percent a few years ago during the economic slowdown. He says inventory below 5 percent of homes in the exclusive gated community indicates a seller’s market.
A surge in vacation home purchases is helping fuel the seller’s market on the Island.
“Buyers are snapping up vacation homes, thanks to stock market gains and a wave of baby boomers searching for a pleasant spot to spend their golden years,” according to a recent article in the Christian Science Monitor. “[Second homes] accounted for 21 percent of sales in the U.S. last year, the highest share ever measured by the National Association of Realtors. The number of purchases shot up 57 percent in 2014.”
Low interest rates and a strong economic recovery, which has brought record corporate profits and stock market highs and pushed the unemployment rate down to 5.1 percent, are driving the boom in second home sales and the broader seller’s market.
Interest rates provide double motivation to buyers at the moment. Not only is money so exceptionally cheap that even people who could pay cash are borrowing to buy houses, but there is a looming threat of interest rate increases that makes buyers want to seize the moment.
A one-percent increase in mortgage interest rates adds about 12 percent to the monthly mortgage payment on a half-million dollar loan, bumping the cost up from $2,387 to $2,684, and buyers are looking to lock in deals before money gets more expensive.
Island agents issue two caveats about the market: First, even with thin inventory and all the pressures pushing buyers, the seller’s market is not universal.
Homes that are over-priced, run-down, in bad locations or are otherwise unappealing may still sit on the market, and certain types of housing move more quickly than the average property. (In John’s Island, Gibb says properties under $3.5 million attract the most buyers.)
Second, some buyers are still angling for a deal. “I think buyers are still negotiating somewhat,” says Grier McFarland, a Realtor with Dale Sorensen Real Estate. “They are only getting very slight reductions, but they are not just caving in.”
But with most brokers reporting qualified buyers queued up offstage with checkbooks in hand, eager to purchase an island property that meets their needs and expectations, power will likely continue shifting to sellers.
“For homes under $1.5 million, which is what I am familiar with, buyers want to negotiate a better price but they are counseled by me or other brokers that they will most likely not be the successful bidder if they do,” says McLaughlin.
“I don’t think there is going to be negotiability going forward and we will most likely be getting into bidding wars this season,” she added.
“When a buyer does see a property that meets their needs, they are ready to buy immediately,” says MacWilliam. “If it is a good house at fair price, it is sold in 24 to 48 hours.”